Zurich abandons takeover of UK insurer due to Tianjin explosion losses
21 September 2015
Swiss insurance giant Zurich has abandoned its proposed £5.6bn bid for British insurance group RSA because of an estimated loss of $275m from the incident at the Port of Tianjin in China, where a warehouse containing explosive and toxic chemicals exploded on August 12 killing at least 174 and devastating an area of several square kilometres.
The Financial Times estimates overall insurance industry losses from the Tianjin incident at around $1.5bn.
Instead of buying RSA in a proposed transaction first announced in July, Zurich will focus on improving performance of its general insurance business, the Swiss group said. Shares in RSA, buoyed over the past few months by the takeover discussions, fell by 20% on the news.
In addition to claims relating to the Tianjin port explosions, Zurich said it expected weaker-than-expected profitability in general insurance in the first half of 2015 to continue into the third quarter.
The insurer said recently completed reserve reviews show a likely negative impact of about $300m in the third quarter for its US car activities and other lines of business.
"Given the deterioration in profitability ... General Insurance CEO Kristof Terryn is conducting an in-depth review of the business," Zurich said.
Stephen Hester, the chief executive of RSA Insurance, was in line to leave the company with more than £8.5m if the deal had gone ahead.